It’s no secret that most banks collect fees for their services as a form of income. As interest rates remain low the cost of account fees has a real impact on your ability to save. If you’re looking for a new checking account make sure cost of fees is a high priority.
Thanks to technology almost every bank or credit union offers convenient features like online banking and a mobile app. When it comes to cost of checking fees there are significant differences. That’s why finding a bank or credit union with a fair fee structure is more important than you think.
There are three fees that come with most checking accounts that should be avoided at all costs. Here is how each one differs in cost depending on the type of financial institution.
One of the most common and costly fees applied to a checking account is the overdraft fee. An overdraft fee is charged when a withdrawal from an individual’s bank account exceeds the available balance. The bank or credit union will then apply the fee to cover the cost of the transaction.
Large national banks lead the way by having the highest average overdraft fee of $34.80. Community banks have a much lower average overdraft fee of $30.20. Credit Unions have the lowest average overdraft fee of $28.90.
Overdraft Transfer Fee
To combat having to pay a high overdraft fee most financial institutions offer a form of overdraft protection. One option is a service that links a second account to automatically transfer money over to cover an overdrawn account. There is a fee for this service, but it is usually lower than paying an overdraft fee.
The average overdraft transfer fee charged by national banks is $12.30. Both community banks and credit unions charge much less for the same service. The average fee from community banks was only $5.00, and even less from credit unions at $3.64.
Extended Overdraft Fee
No one plans on overdrawing their checking account, but life happens and sometimes you have to pay for an unexpected bill or expense that puts your account balance below zero.
If you do happen to overdraw your checking account make sure you don’t let it linger for too long. If your financial institution charges an extended overdraft fee you will end up paying much more than you thought.
An extended overdraft fee is charged on a daily or routine basis if your account balance remains negative. The amount of this fee varies, but your best chance for avoiding it completely is with a credit union. Only 10% of credit unions charge their members an extended overdraft fee compared to over 90% of national banks.
As a consumer it’s hard to avoid all account fees, but if you go by the numbers choosing a local bank or credit union gives you a better chance.